UPDATE 1-Polish c.bank hawks say Feb rate cut may be needed

WARSAW, Feb 3 (Reuters) - Poland's central bank may cut interest rates again at the February meeting of its rate-setting panel, two hawkish policymakers said on Tuesday, in comments underlining the pace of the country's economic slowdown.

The bank's 10-strong Monetary Policy Council (MPC) has already cut its main rate by 175 basis points to 4.25 percent since November to buttress growth hit by the global crisis and now expected to fall to about 2 percent in 2009.
'We're still in an easing cycle... Every sharp decline in industrial output breaks the balance in the economy. We can't allow for that now,' policymaker Marian Noga told the Gazeta Prawna daily in an interview.

'I do not rule out that in February we might have another rate cut,' said Noga, who consistently backed rate hikes during the bank's previous monetary tightening cycle.

Halina Wasilewska-Trenkner, one of only two council members to oppose November's cut in interest rates, said the chances were equal of the bank cutting rates or making no move when it meets later in February.

She signalled the central bank's inflation projection, which policymakers traditionally obtain before the MPC's February meeting, would be key to the decision.

Noga also said it would be more appropriate now for the central bank to move in cuts of 25-50 basis points. Wasilewska-Trenkner did not elaborate on her preferred scale of easing.
In a further sign of the slowdown, the head of the state investment agency said foreign direct investments into the European Union's largest ex-communist member were likely to drop to 7-10 billion euros in 2009 from about 12 billion in 2008.

Labour Minister Jolanta Fedak said on Tuesday unemployment could jump to as much as 12 percent by the end of this year if economic growth continues to slow.

Poland's unemployment has recently started to rise after a prolonged downward trend, hitting 9.5 percent in December.

Source:By Adrian Krajewski, Kuba Jaworowski
forbes.com

UPDATE 2-Polish rates may be cut to below 3 pct-c.banker

Poland's central bank should cut interest rates further, possibly to below 3 percent, as economic conditions deteriorate and inflation keeps falling, key Monetary Policy Council member Jan Czekaj said on Monday.

In response to the sharply slowing economy, easing inflation and the global crisis, the central bank began to lower borrowing costs in November 2008 and has reduced its benchmark rate three times by a total of 175 basis points to at 4.25 percent.
he finance ministry said on Monday it expected price growth to have eased to 3.2 percent in January, from 3.3 percent in December -- moving closer towards the bank's 2.5 percent target.

'I believe that there should be more rate cuts fairly quickly,' Czekaj told daily Rzeczpospolita in an interview released on Monday.

'Maybe the proper level for the (key) rate would be 3.5 or maybe 3 percent ... If the economy will be growing slowly it cannot be excluded that we will need to lower the rate to below 3 percent.' Czekaj is a key swing-voter on the 10-strong MPC.

He also said that he saw no reason for delaying or dropping the government's ambitious plans for euro adoption in 2012 because of the sharp global and domestic economic slowdown.

'There is no such need,' he said. '...ERM 2 entry could calm the situation on the currency market.'

Many analysts say that pushing ahead with euro adoption in 2012 could be too risky because high market volatility and the global crisis would make it harder for the zloty currency pass one of the entry tests, spending two years proving its stability in the pre-euro ERM 2 currency grid.
Analysts expect more interest rate cuts but remain split on where the key rate will end this year and how low it will fall in this easing cycle. The median forecast in the latest Reuters poll places the key rate at 3.25 percent in December.

'There are objective conditions for easing monetary policy,' Czekaj said.

Although the Polish Purchasing Managers' Index (PMI) rose to 40.3 points in January, the first rise in the index since February 2008, it is still well below the 50 growth/contraction divide, showing the manufacturing sector remains weak.

'Overall, the first batch of 2009 PMI data point to further aggressive rate cuts by the central bank in the first quarter,' said Trevor Balchin, economist at Markit Economics, which compiles the PMI data. 'Inflation concerns have eased despite the falling zloty, as the PMI showed further falls in price pressures in manufacturing.'

Poland's gross domestic product (GDP) growth in 2008 eased to 4.8 percent, from 6.7 percent in 2007, preliminary statistics office estimates showed last week, and some analysts said the sharp slowdown in investments last year indicated more trouble ahead for the Polish economy.
Source:By Karolina Sowikowska,Ruth Pitchford,
forbes.com